In a legal battle that mirrors a recent verdict in Missouri, a proposed class-action lawsuit has been filed against the Real Estate Board of New York (REBNY), along with more than two dozen brokerages and companies. The lawsuit alleges a conspiracy to artificially inflate commissions paid to agents involved in residential real estate sales in Manhattan. The lawsuit follows a landmark verdict in Missouri where home sellers were awarded $1.78 billion in a similar case against the National Association of Realtors and various brokerages.

The outcome of the Missouri case, which could potentially be tripled to over $5.3 billion, poses a significant threat to long-standing practices that require sellers to pay commissions to buyers' brokers. As a result, this legal action has the potential to upend the real estate industry's commission structure, which has remained stable at 5% to 6% for Manhattan residential sales despite skyrocketing home prices. The average apartment price in Manhattan is expected to exceed $2 million by early 2022.

The plaintiff in the lawsuit, Monty March, argues that commissions paid to buyers' brokers through REBNY's listing service are inflated and should not be as high as 2.5% to 3% of the sale price. March contends that in "fully competitive" markets such as Brooklyn, commissions are negotiated separately and average around 1%. Monty March personally experienced these allegedly exorbitant commissions when he sold an Upper East Side apartment for $5.6 million in July 2022.

Both Corcoran Group and Douglas Elliman, two of the brokerages named in the lawsuit, have not yet responded to requests for comment.

REBNY has announced new measures to ensure transparency and consumer confidence in the residential marketplace. Starting from January 1, 2023, sellers, rather than their brokers, will be required to directly pay commissions to buyers' brokers. Although the new policy intends to promote transparency, March raises concerns about whether this change will lead to lower commissions or potentially delay sales as buyers' brokers negotiate directly with sellers.

The class-action lawsuit seeks damages for sellers of Manhattan residential properties who have paid buyer brokers' commissions under REBNY rules over the past four years. The lawsuit raises significant questions about the fairness and transparency of the commission structure in Manhattan's luxury real estate market. It remains to be seen how this legal battle will ultimately impact the real estate industry and the millions of dollars in commissions that are at stake.